An Open Letter to Paul Krugman

June, 2014

Dear Dr. Krugman,

I read your review of Timothy Geithner’s Stress Test with the typical amusement that so many of your writings engender. 

Have you ever stopped to think that your whole economic model, that demand drives the economy, could be wrong? When was the last time you contemplated that? Ever?

To assist you, I set up the Put Growth First Challenge. Consider it the world’s first-ever empirical study to once and forever prove whether production (supply) or consumption (demand) drives the economy.

Here’s the deal. I will ship you to one of Alaska’s beautiful but uninhabited islands. As the island’s only market participant, you will show us non-Ph.D.-types how exactly you can consume anything without first producing it. You may take with you only the clothes on your back, but nothing else that has already been produced.

Trail cameras will be set up all over the island to capture this phenomenon and footage will be posted to The rules stipulate you can’t use a magic wand to consume something which has not yet been produced, so cameras will be there to “trust, but verify” your compliance. 

The cameras will also fulfill an important educational role. In my 25 years of business experience, and a lifetime of being both a producer and consumer, I have never observed a single case of something being consumed before it was produced. Despite my valiant attempts to educate myself on economics, I still don’t understand how demand could possibly drive the economy.   

Lastly, the cameras are for entertainment too. I picture you standing there demanding fish so you can consume it.  When that doesn’t work, you will DEMAND fish.  When that fails, you will REALLY, REALLY demand it.  You will demand things so hard your fists will clench and a vein will pop out of your head or something.  That’s the money shot I’m looking for. Hello viral video.

In your textbook economic model, is a fish supposed to jump out of the water, filet itself, float through a fire until tender, flakey and juicy, then tear itself into bite size pieces, glide into your mouth, jump up and down against your teeth, then slide down your throat?  All this, simply because you demanded it? Really? I gotta see this! In my model, you have to catch a fish first (ie. engage in an act of production), before you can consume it.

As Hilary Clinton might ask, “What difference does it make?” It makes all the difference in the world. Production has to happen first, only then can we get paid, and then, and only then, may we consume. Production pulls along consumption the way an engine pulls the caboose. Just because they travel at the same speed, don’t be fooled into thinking the caboose is pushing the train. In your model, if pouring fuel in the caboose doesn’t work, you recommend pouring even more fuel in it.  

At some point, after your arrival, but before the time at which steadfast adherence to a failed model will cause your starvation, your God-given survival instinct will overcome your mighty intellect and you will produce something (first) so you may consume it (second). Thus, Mother Nature will convert you to a supply sider even if you never figure it out on your own.

Assuming you make it back to the mainland, we’ll throw a ticker tape parade to celebrate your conversion to the supply side. Boy, the fun you will have. The next time the Hope and Change crowd calls for taking a bucket of water from the deep end of the pool and pouring it in the shallow end, rather than calling for an even bigger bucket, you can join me and we’ll ridicule them together while they stand around and hope the water level will change.  LOL. Besides, taking something out, then putting it back in, is called doing the Hokey Pokey. ROTFLMAO!

If we start hanging out together, I can teach you what I’ve named the Woodhill Equation (which I named after my friend Louis Woodhill). This says that GDP is a function of 45% times non-residential assets, plus 7% times residential assets. (It’s similar to a return on asset calculation, but using GDP relative to the nation’s asset base.) It is how the world works. It means that GDP is produced by assets that accumulate as a result of investment. Thus, investment drives GDP. Because even an Ivy Leaguer knows 45% is greater than 7%, together we can proclaim the best way to grow GDP is through non-residential business investment, not consumption or demand or redistribution.

The standard textbook equation of GDP=C+I+G+(X-M) creates an optical illusion that you and the other “serious” economists fall for every time: that increasing consumption could increase GDP. That equation shows what happened to the GDP that was produced, the same way your pay stub shows what happened to the income you earned. Your pay stub can’t tell you how to make more money any more than the above equation can tell us how to expand GDP.  If we become friends, let’s plan a party to toss that most dangerous equation in the trash heap of history.  Replacing it with the Woodhill Equation will help everyone else see that this is the worst economic recovery since the Depression precisely because this is the worst recovery in business investment, not because the bucket is too small.

Importantly, you’ll be able to go back and revise the line in your Stress Test book review from “…there’s a growing consensus among economists that much of the damage to the economy is permanent, that we’ll never get back to our old path of growth” so that it instead reads “…there’s a growing consensus among economists using the wrong model that much of the damage to the economy is permanent, that we’ll never get back to our old path of growth. But those of us using the right model clearly see that the only thing holding us back from robust economic growth are monetary, tax and regulatory policies that are holding back non-residential business investment.”

I look forward to partnering with you to restore robust economic growth.

Best Regards,


Rich Lowrie

Co-Founder, Put Growth First

p.s. Refusal to #TakeTheChallenge is an admission that your model is wrong.



  • I have invited some of my hunting buddies to accompany me to the island to hunt bears for sport under the pretense that, in doing so, we are protecting you.  You may not redistribute anything from us.
  • If Sarah Palin joins us on the hunt, don’t be intimidated by a smart, accomplished, attractive woman.  She’s cool.  DO NOT scare her away!!
  • This offer is transferrable to Robert Reich or to any of your flat-earth brethren if you decide sparing yourself some potential embarrassment is more important than saving the economy.
  • Upon your conversion to the supply side, you agree to reimburse all of our expenses.  If you don’t convert, at least you’ll stay isolated where you can do no further damage to economic growth.

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